Long-Term Care Insurance Update

Recently a new law went on the books giving consumers tax advantages for the purchase of Long-Term Care (LTC) insurance. This action taken by our government sends a clear message that individuals must begin to provide for their own LTC. Medicare and Medicaid simply cannot afford to expand programs to provide LTC. The role of government is now to encourage the purchase of LTC insurance by providing tax incentives to do so.

The following are some specific provisions of the legislation that benefit consumers most:

• LTC insurance premiums will be deductible as a medical expense for those who itemize (subject to limitations)
• LTC insurance benefits received by a claimant will be tax-free to the recipient (subject to limitations)
• LTC expenses that were not covered by insurance will be deductible for those who itemize (subject to limitations)
• Employers who pay LTC premiums on behalf of an employee will be entitled to deduct that premium as a business expense
• LTC premiums paid by an employer on behalf of an employee will not be treated as income to that employee

The new legislation outlines 5 to 6 activities of daily living (ADLs): eating, toileting, transferring, bathing, dressing and continence. An LTC policy holder will qualify for benefits if he fails at least two of these ADLs. The legislation also requires that tax-qualified policies coordinate with Medicare so that there is no overlap between Medicare and private LTC insurance policies.

This new legislation provides the strongest endorsement yet for private LTC insurance. Call our Wyandotte office to discuss this important and necessary piece of your insurance portfolio.